Working remotely has increased in popularity. The COVID-19 pandemic forced many employers to have most of their staff work remotely. Many individuals have chosen to continue working from home or working remotely from anywhere. Digital nomads can work in countries worldwide for global companies as employees, freelancers, or independent contractors.
Companies can hire payroll employees in foreign countries and pay them benefits based on local laws. These employees are not US citizens but work abroad for a US company. Working remotely for a US company is perfect for non-US citizens as long as they follow some rules.
Regarding the location where these employees work, they can travel and move around while working. They can do this as long as they follow the local visa laws and the duration of their stay in that country. They can follow the rules of their tax residence. They need to file a W-8BEN form and get consent from their employer to move around as digital nomads.
Since visas have a set duration, depending on the local laws, traveling frequently may be necessary for digital nomads. If they don’t overstay their visa and follow all local laws, including tax laws, they may travel and move from destination to destination. The following sections list the requirements for a non-US citizen to work abroad for US companies.
Get consent from your employer and establish your worker classification
An individual wishing to work remotely for a US company and travel abroad must first get the employer's consent and make sure the classification is correct. A company may not approve of the work being performed while the employee travels. Hence, the individual must fill their employer in on their intention to travel while working.
The individual’s classification depends on how they were hired, either as an employee on the company’s payroll who gets paid a wage or as an independent contractor, or freelancer, who gets paid by submitting invoices to the client company for labor hours worked. Unlike employees, contractors set their schedule so it may be easier to work around various time zones. They also choose where to work, unlike employees who may be required to be present at meetings.
If a contractor travels in a country, that country’s laws would need to be followed. If the employer pays the worker as a contractor, they must not treat them as employees. For example, they cannot tell the contractor where and when to work.
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File taxes with your country of tax residence and complete form W-8BEN
A W-8BEN form is a name for a Certificate of Foreign Status of a Beneficial Owner For United States Tax Withholding For Individuals. A foreign person, known as an individual non-resident alien (NRA), subject to withholding, needs to fill in this form and give it to the withholding agent or employer. This is required even if an exemption or reduced rate is being claimed.
The W-8BEN form is the form that an NRA fills out if they are subject to withholding of income taxes on incomes earned from US sources. Since the remote digital nomad would be working for a US company and earning income from the US company, the worker would need to pay US income taxes. Failure to provide a filled-in W-8BEN form may result in a 30% withholding.
Know the local visa and permit requirements before you travel
Visa requirements differ around the world. Each country has its own visitation rules allowing foreign nationals to stay in a country and work there for a set limit of time. For example, an individual traveling to a country may remain in the country for one year. Some nations do not require visas for neighboring countries, such as European nations allowing other EU citizens to work in the country without special permission.
Many nations have recently adopted rules for remote visas to boost their economies in the tourism sectors and increase their tax revenues. These remote work visas allow foreign nationals to stay in the country for a certain duration while working remotely for a foreign company. Some of these countries allow for tax-free and even visa-free travel into the country.
It is essential to learn the visa requirements in any country on the travel itinerary to stay and work remotely in that country legally. There may not be an instant approval, with some countries taking a month to approve the applicant, so visa applications should not be a last-minute task. Visa applications in destination countries should be planned ahead of time.
Do not interact with the local market as a remote worker
For an individual to legally be able to travel abroad and not pay income taxes in a foreign country, they must not interact with the local market. They are employed by a US company and work only for the US company. They cannot subcontract or hire local workers or buy and sell items or services on the company’s behalf in the local markets. Governments can revoke an individual’s visa if they find out they participated in the local labor market.
In addition to that requirement, the individual should not be doing business in that country, or there is the risk the local government may consider the company a permanent establishment and may need to pay corporate income tax. A permanent establishment is a risk most companies try to avoid.
Understand the different payment options
Employees working remotely need to know how they will be paid. The sending of paper checks through the mail is likely not a feasible option considering the time it would take to receive the bill and the necessity of physically depositing the check in a local bank. There are numerous digital options for employees to be paid, including ACH direct deposits. Employees traveling abroad need to know how their employer will pay them and should have this in writing before traveling.
Contractors receiving invoice payments may also be paid conveniently through payment platforms such as Wise or PayPal. There should be a section in the contract regarding the currency of payments and how the contractor or employee will get paid.
Working remotely abroad for a US company has many rewards, including the ability for people to work while traveling the world as digital nomads. Non-US citizens working for US companies abroad can also work and live abroad if they follow certain rules and regulations. A U.S. citizen working abroad for a US company should follow similar rules. These rules include ensuring all local laws are followed, including visa laws and any limits on the duration of the stay in the company.
Some countries allow tax-free and visa-free visits, while others may require specific types of visas and local income taxes. Local markets must not be interacted with — the employee only works remotely for the US company, not a local company. The employee should get consent from the employer and paperwork and know how they will get paid their salary.
With remote work becoming more popular since the pandemic, more individuals are deciding to become digital nomads and travel the world while working remotely and earning an income from a global company. These individuals can work at a hotel, internet cafe, the beach, or wherever they are staying for their visit, as long as they can connect to the internet.
Workers may also want to travel around, take advantage of short-term visas in countries, and move on to the next destination once the visa expires. They can do all this legally if they follow the rules and guidelines in this article.
Hire Your Next Employees or Contractors With an Employer of Record Like Skuad
An employer of record such as Skuad can help employers, whether in the US or elsewhere, hire international employees and contractors without setting up a subsidiary. The employees your companies hire or the contractors your company contracts with can work from their homes or anywhere else, even while traveling from country to country, as long as they follow certain rules.
Skuad makes it easy to hire, onboard, and pay employees and independent contractors in over 160 countries. Organizations can pay employees and contractors in over 100 currencies.
Your remote employees and contractors will be:
- Hired and added to the company payroll.
- Paid accurately in their local currency at the correct payroll frequency and have taxes withheld and delivered on their behalf.
- Provided statutory benefits mandated by law as well as supplemental benefits offered in comprehensive benefit package options.
Skuad’s Employer of Record service makes it easy for companies to employ remote international employees and contractors without needing a local legal entity while remaining compliant with local employment laws and tax regulations. For a demonstration of how Skuad can help your organization expand globally and hire remote employees and contractors, Book a demo today.